CAD steadies after 200-day MA slows USD ascent - Scotiabank

The Canadian Dollar (CAD) is all but unchanged on the session amid very tight overnight range trading, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Little sign that the CAD is poised to rebound

"A somewhat softer USD has eased downside pressure on the CAD to some degree but there is no sign of the CAD reversing its recent drift lower despite its significant undervaluation relative to our fair value estimate. BoC DG Mendes yesterday indicated that the Bank is considering new ways of measuring core inflation and may exclude mortgage interest costs from those measures."

"He noted that the Bank sees core inflation around 2.5% currently, well below where its own measures currently indicate underlying price growth to be (around 3%). Given the tone of Mendes' comments, the difference may be an indication of how much mortgage interest rates are affecting core measures. He said, however, that the Bank is mulling new ways of measuring core inflation and will publish a 'dashboard' with an 'array' of CPI measures in 2026."

"Spot made a pinpoint test of the 200-day MA (1.3987) yesterday and has consolidated in a tight range on the session so far today. The 200-day MA capped the USD rebound back in May just above the 1.40 point. There is little sign that the CAD is poised to rebound, however, and the broader grind higher in the USD looks solid but somewhat overbought which may means resistance around the 1.40 mark will continue to cap the USD at least for now. Support remains 1.3880."